Can the Job Market Get Any Hotter?

The Pitch: Economic Update for May 5th, 2022

(The Pitch is a weekly economics newsletter written by Zach Silk. Follow here on Medium or sign up for free on Substack to receive a new issue in your inbox every Thursday.)

Friends,

Before anything else, we have to acknowledge that every other news story this week has been overshadowed by the draft Supreme Court opinion that would overturn Roe Vs. Wade, making abortion illegal in roughly half of all states. It’s hard to overstate how damaging this decision will be for the country, if it is eventually released as currently written. The draft removes autonomy from more than half of the population, and it casts a shadow of doubt over the legality of any number of Supreme Court decisions over the last half-century, from the Obergefell v. Hodges decision that legalized same-sex marriage to the Brown v Board of Education decision that made segregation illegal.

Earlier this year, our team at Pitchfork Economics had a good conversation with economics professor Caitlin Myers about the economics of abortion, and how denying abortion from pregnant Americans could ultimately strip them of the ability to participate in the economy as full human beings. I’d encourage you to go back and listen to that conversation to help you comprehend how high the stakes really are with this decision. Particularly, this comment from Myers has been at top of mind since the news of the decision broke Monday night:

If Roe and Casey are overturned or substantially weakened, what economists know is that this is going to have repercussions throughout the lives of poor women and their families. And if states want to pretend that is not the case, that there is not this impact, I worry about the further fraying of the social safety net they might string up to capture these vulnerable families. If you believe it just doesn’t matter to their lives, then you also don’t have to step in with other forms of social support for them.

Denying abortion access doesn’t just harm those who are pregnant. Because 59 percent of those who get abortions are already mothers, this decision would harm children and families. And if it harms families, it will harm communities and cities. It will ultimately harm all of us. I’ve seen no cogent policy from the minority of Americans who actually want to ban abortions that would address any of those concerns, which is why it seems clear to me that for opponents, banning abortion is primarilly about removing power from women.

If you’re looking for solutions, I’d direct you to the Center for American Progress, which has put together “A Proactive Abortion Agenda” outlining the federal and state policies that ordinary Americans and their elected leaders should support to unspool some of the damage that the Supreme Court will cause when they eventually release their decision. One advantage that our opponents enjoy is the fact that it’s easier to destroy than it is to create. But the Supreme Court’s overreach has activated millions of people who will not rest until these protections are restored and strengthened, and the CAP report provides a good roadmap for how to get that done.

The Latest Economic News and Updates

The Fed continues to raise rates. Nobody knows what will happen next.

Yesterday, the Federal Reserve raised interest rates by half a percentage point — the highest rate hike in two decades — and signaled that many more interest-rate increases were on the way in an attempt to rein in runaway inflation. The stock market responded positively to the rate hike, particularly because Fed Chair Jerome Powell assured investors that future increases would remain at the half-percentage mark or below. A strategist at Charles Schwab told CNBC that his firm was pleased with the Fed’s actions, in part because “we think inflation is close to peaking.”

But of course, the stock market is not the economy, and the experts have no idea what’s going to happen next. It’s unclear how the Fed’s actions on their own are supposed to curb a global inflation crisis caused by pandemic supply chain issues and runaway corporate greed. One thing that we do know, though, is that raising inflation rates increases the possibility of job losses and recession. If anyone tells you that they absolutely know what’s going to happen in the economy, they’re lying to you (or themselves.)

Good news for workers: The job market is still super-hot

Despite last week’s news that the GDP declined for the first quarter of 2022, the job market continues to roar. The Washington Post’s Abha Bhattarai reports that some 4.5 million Americans quit or changed jobs in March, and employers posted a sky-high 11.5 million job openings. That’s why wages have climbed for median American workers by 4.7 percent over the past year, with workers who switched jobs seeing a 5.3 percent increase in pay. And that average is covering up even more impressive numbers: the Wall Street Journal reported that about a third of all job-switchers received a raise of 11 percent or more, with just shy of 9 percent making at least 50 percent more. Those are the strongest increases American paychecks have seen in living memory, but they still remain below inflationary price increases, meaning workers are still losing money when you take higher prices into account.

“U.S. employers have added more than 400,000 jobs a month for nearly a year,” Bhattarai notes. “Overall, the number of job openings grew 36 percent in March from a year earlier. Demand for workers rose markedly in retail (where job openings increased by 155,000 from February), manufacturing (up 75,000) and finance and insurance (up 51,000).”

In an editorial for CNN, economists Elise Gould and Heidi Shierholz warn that though the job market is booming, “virtually none of the obstacles in the way of having a better and fairer economy that existed before Covid have yet to be addressed.” In order to transform a temporarily hyper-charged job market into solid and lasting gains for American workers, they argue that leaders should raise the federal minimum wage, improve access to unions and collective bargaining, and repair the unemployment insurance program so that workers in all 50 states have access to a strong safety net.

For the first time in decades, rich people lost wealth while poor people profited

Interestingly, a new report from Realtime Inequality finds that wages in the bottom 50 percent of the economy have increased by 3.4 percent in the first quarter of 2022, while every other portion of the top 50 percent of the income scale has lost wealth. The top one percent lost 6.5 percent of their average income from January to March of this year.

“In the first quarter of 2022, wage gains for the bottom half continued — but a sluggish market meant that rich folks’ income growth turned negative,” Axios’s Felix Salmon reports before concluding that “Wage inflation is good for workers and bad for the rentier classes.” Let’s set aside the ridiculous term “wage inflation” for a moment — ordinary Americans call those “raises” — and remember that the wealthiest Americans keep a significant share of their fortunes in stocks, and that this has been a terrible quarter for the stock market.

And before you decide to host a bake sale for the wealthiest 1 percent, please keep in mind the chart below from Realtime Inequality, which shows how income inequality has exploded in America since 1976. You can see that the middle 40 percent of the economy (the bottom blue line) has become detached from the top one percent (every other line except the red) in a profound way, and the top ten percent (the red line) has made huge gains since the Obama administration in ways that the middle class simply has not. The gains discussed above are at the moment nothing more than a momentary blip on this scale, not a great rearrangement of wealth in America.

Sixty million workers have signed away their right to sue employers

Susan Antilla at Capital and Main writes about the huge scam that is forced arbitration. Some 60 million non-union workers in the U.S. have basically signed away their right to sue employers in court for wage disputes and other workplace injustices, instead agreeing to an expensive arbitration process that favors employers in more than four out of every five cases.

“The biggest users of arbitration, at 62.1%, are the education and health industries, which traditionally have been female-dominated, while the lowest user is the male-dominated construction industry, at 37.7%,” writes Antilla. She cites research showing that “59.1% of African-Americans were subject to mandatory arbitration compared to 55.6% percent of non-Hispanic whites,” and that “Among workers making less than $13 an hour, 64.5% were bound to arbitration agreements — higher than for any other pay level.”

In effect, employers are making low-wage women and nonwhite workers sign away their right to a fair trial when it comes to workplace violations, instead subjecting those workers to a phony justice system rigged in the favor of big corporations.

Some form of student debt cancellation is on the way

President Biden has signaled recently that he is “seriously considering” some form of student debt cancellation in the very near future. Biden’s hints are growing increasingly more and more specific: First, he confirmed that he was looking at some form of debt forgiveness, and then earlier this week his administration confirmed that they were looking into debt forgiveness for Americans earning under $125,000 per year.

Nate Morris at the Black Wall Street Times notes that student debt cancellation would be an especially meaningful act to reduce the racial wealth gap because studies show that “Black Americans hold a higher student-debt to income ratio than White Americans. Generally, those with a higher debt-to-income ratio are less likely to build the credit necessary to finance home and business loans.”

Because this news is picking back up, the past few weeks have seen an uptick in think-pieces about how canceling student debt would be unfair for people who have already paid off their debts, so I wanted to share my colleague David Goldstein’s excellent essay for Vox from 2020 about why, even though he has paid off his student loans, he still supports student loan debt forgiveness.

Union drives keep rolling

If you pay attention to the news, almost every day seems to bring another union election at a Starbucks store or Amazon warehouse. The Amazon Labor Union lost an election this week at a New York warehouse not too far from the warehouse that voted for unionization a month ago. Meanwhile, three Starbucks stores in Minnesota and New Jersey voted to unionize this week, while one Starbucks in Hawaii voted against a union.

Also this week, Starbucks leadership launched a particularly devious attack on unionized stores by announcing plans to raise wages for all employees except those who voted to unionize. Noam Schieber notes at the New York Times that “labor law experts said that it could be illegal to withhold wages and benefits from only unionized employees or employees voting on a union.” The union has filed a complaint with the National Labor Relations Board, which has been newly reinvigorated under President Biden’s pro-union leadership.

Much of the conversation about unions lately has focused exclusively on increased wages, but a new report from the Washington Center for Equitable Growth collects research that shows many other benefits of unionization, including the fact that unionized workplaces are much more likely to follow health and safety regulations and that unions are an excellent deterrent against wage theft, which disproportionately impacts immigrants, workers of color, and women.

By focusing directly on raising wages, Starbucks is hoping to pressure employees into dropping their pro-union push. But reports like this one make it clear that there’s a lot more than just a bigger paycheck in the balance for workers when they unionize: Union shops are safer, more equitable places to work.

Real-Time Economic Analysis

Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunk Works; and follow us on Twitter and Facebook.

• On Civic Action Live this week, we’ll talk about the Fed’s decision to raise interest rates by half a percentage point, how to ensure that American workers leave the blazing-hot job market with more power than they had before the pandemic, and why canceling student debt would be good for the economy. Join us on Friday morning at 10:30 am Seattle time.
• The Pitchfork Economics podcast this week is all about how private equity firms buy up beloved-but-declining American brands like Toys R Us, load them up with massive debt, and then sell the parts off for scrap — a practice that kills jobs and leaves communities around the nation economically devastated.
• And in his Business Insider column, Paul talks about 22 major American companies that choose to spend more on stock buybacks that enrich a tiny portion of elite shareholders than invest in their workforce in the form of higher wages and better benefits.

Closing Thoughts

These are such fraught times that I thought it would be worthwhile to close with some unalloyed good economic news. Tracy Jan at the Washington Post reports that we are currently experiencing a Black small business boom.

“In the early months of the pandemic, Black-owned small businesses closed at twice the rate of other businesses, with 41 percent shutting down, according to April 2020 census data,” Jan writes. “Then Black business ownership rebounded, soaring higher than it had been pre-pandemic, a Washington Post analysis of Bureau of Labor Statistics showed. In 2021, Black-owned small businesses were created at the fastest clip in at least 26 years.”

This is wonderful news for the economy as a whole. Entrepreneurship in America has been on the decline for decades — an especially troubling metric since most of the large employers of today began as small businesses in decades past. Small businesses generate more wealth for their local communities than large employers, they more accurately respond to the needs of their communities, and they generate more revenue for local taxes.

We have needed more Black entrepreneurs in our country for a long time, and the pandemic has spurred significant growth. Now our leaders should be working hard to make sure those businesses can thrive by improving access to capital for Black business owners, working to ensure that banks improve access for Black communities, and making it easier for Black businesses to own commercial property.

American small businesses have not had a level playing field for quite some time. Federal policies have favored giant corporations over entrepreneurs for decades. Now that we’re seeing entrepreneurial growth in communities that have most needed it, our leaders should be surfing that wave of growth by doing everything they can to support and foster these businesses. The great news is that it’s easier to encourage existing success than it is to create success out of thin air, and the conditions are perfect for a long-term Black business boom.

Be kind. Be brave. Get vaccinated — and don’t forget your booster.

Zach